Setting speculation to rest,state-run Steel Authority of India Limited (SAIL) has finally lapped up ailing Malvika steel plant at an estimated Rs 210 crore after outplaying Jaypee Group and ArcelorMittal. The plant is located at Ambikapur in Amethi,which is Congress MP Rahul Gandhis Lok Sabha constituency.

SAIL has acquired Malvika Steel and tomorrow (Friday) Rahul Gandhi would accompany us to Amethi, steel minister Ram Vilas Paswan said. Paswan did not elaborate any further,but ministry sources said the total cost of the acquisition could be nearly Rs 500 crore and initial investment would be Rs 210 crore. The Indian Express was the first to report on the issue.

Malvika Steel,which proposed to set up a 6.5 lakh tonne integrated steel plant in 1998 at an envisaged investment of about Rs 3,000 crore,never actually got off the ground. It had taken loans to the tune of Rs 1,800 crore from a consortium of banks and financial institutions led by IFCI Ltd.

IFCI itself had lent Rs 600 crore to the company whose plant is spread over 740 acres at Jagdishpur in Amethi. While about 1,000 workers were laid off in 1998,sources said there were only about 200 workers who were still hoping the plant would be revived. The company started defaulting on loans in 2001 and was subsequently taken over by FIs,who have moved the Debt Recovery Tribunal (DRT) to get whatever they can by selling the company. The DRT has set a reserve price of Rs 207 crore for the beleaguered steel company.

The company,promoted by the Rai family,turned sick soon after the plant was set up,following which FIs took over the company and approached SAIL and Tata Steel with a takeover proposal. After due diligence,the state-owned steel major agreed to bid for the company but the promoters were unhappy with the price offered by SAIL. Subsequently,Jaypee group offered Rs 207 crore,which was matched by SAIL.

But the race for Malvika Steel had intensified with Arcelor Mittal and another company jumping into the fray. But finally SAIL clinched the deal. The BSE-listed company has been in the red for the past many years and ownership issues have stalled progress in the takeover of the company by prospective suitors. The plant was initially planned to have a capacity of 8 lakh tonne of sponge iron and 1.2 million tonne of iron pellets,but it was converted into a 6.35 lakh tonne integrated steel plant for manufacture of long products used extensively in the infrastructure and construction business.